By HERALDO MUÑOZ (gob.cl/en/ministers/foreign-affairs)
All nations, large and small, trade with one or another to lift their economies and quality of life. Today, the stable, post-World War II consensus on open trade is being challenged as never before. Brexit, the rise of disenfranchised American workers and the uncertainty of upcoming European elections threaten international cooperation in a way that the world has never seen. The rise of nationalist trade and border policies reflects profound domestic pressures sweeping many countries.
But policymakers would be wise to consider the implications of these shifts on the wider world. Advances in travel and communications assure us that, despite rising voices of discontent with globalization, the world will remain open, and what happens afar increasingly will shape conditions at home. Trade is here to stay, and ensuring it remains free and fair continues to benefit countries of all sizes.
Economically speaking, my country, Chile, pales in comparison to major players such as the United States or China. However, in a world of increased innovation and scarce jobs, small countries still matter. For example, Chile, which has a free-trade agreement with the United States, currently buys more products from the United States than Russia, Spain or Italy and a U.S. trade surplus with Chile now nets $9.3 billion for the U.S. economy each year.
Yet, despite this and other examples around the world, international trade has stagnated in recent years, and the Trans-Pacific Partnership (TPP) was the target of strong criticism during the U.S. election season. TPP was meant to increase the productivity of the economies of the 12 signatories, including the U.S. and Chile, while making sure that our companies, particularly small and medium enterprises, can compete in global markets. Furthermore, with the inclusion of environmental and labor provisions similar to those in the U.S.-Chile free trade agreement, protection of workers’ rights in developing countries were brought to the forefront.
For smaller countries in particular, international free trade opens the door to the global economy, multiplying the opportunities for deepening business and investment links that can spur growth and development. In the case of TPP, smaller countries hoped to further intertwine their economic development with that of the United States.
On the other side, the United States and Europe also benefit from an integrated global economy and international trade deals. For the United States, Chile now represents an important export destination in the Latin American region, totaling $15 billion in 2015, a fourfold increase since our free-trade agreement was signed in 2004. The United States is also the main consumer of Chilean services, reaching a value of $233 million during 2015. And, the United States is our principal investor, with an accumulated stock of $29 billion. More broadly, U.S. trade in goods with South and Central America has transitioned from an annual net deficit of $50 billion in 2005, to a record net surplus of $36 billion in 2015.
International trade also offers other benefits for the United States at the federal and state levels, including opportunities for joint initiatives with Latin America and the world at large. Chile has already set up strong programs with Massachusetts and California to carry out innovative collaborative research on education, science, biotechnology and energy. These agreements are facilitating and promoting new relationships among scientists and think tanks in our countries and opening new spaces for collaboration, such as the sustainable management of marine resources, food security and renewable energies.
As the world’s most developed economy, the United States should keep its doors open to international collaboration — not only because it is important for countries like my own, but because collaboration also yields many concrete benefits for the people of the United States.
This new year will bring many of the same challenges as 2016, plus several other difficulties that have yet to present themselves. International trade offers a framework for cooperation in other areas such as security, humanitarian issues, and climate change. A move away from global trade would not only threaten the economic stability of countries such as Chile, but the economic potential of the world could be challenged by increased isolationism. Cooperation between the United States, Chile, Latin America and the world is essential for progress and prosperity across the globe.
Heraldo Muñoz is the Minister of Foreign Affairs of the Republic of Chile.
